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What About Fannie Mae, Ginnie Mae and Freddie Mac?

Many people have heard the names Fannie Mae, Ginnie Mae and maybe even Freddie Mac. If you are anything like me you’ve heard of them but really don’t know what they are. I’d like to help to clear that up for you.

First, they do not write or give mortgage loans. All three deal in what are called the “secondary” markets. What they do is quite different.

Fannie Mae

Fannie Mae is in the business of making sure there is money available to lenders to loan to individuals who want to get a mortgage loan to buy a home or other property. They are a not actually a part of the United States government. Fannie Mae was first set up as a federal agency in 1938. Then, in 1968 they were chartered by Congress in 1968 as a private shareholder-owned company.

All that means that they are a special type of private company which has been given the responsibility of working with lenders and partners to make sure there is money available for the lenders and partners to loan to people who want to borrow money to borrow homes and other types of properties.

They get the money that they make available to lenders and partners by selling a special kind of security (kind of like a bond) to investors in the world financial markets. It is called a debt security. And, since

Fannie Mae’s primary goal in life is to keep money in the mortgage loan market so it can be loaned to people who want to buy property.

Ginnie Mae

Ginnie Mae, on the other hand is part of the United States Government. It is a service provided by HUD.

Ginnie Mae does not buy or sell loans or issue mortgage-backed securities (MBS) like Fannie Mae does. It guarantees that timely loan payments are made to investors who have invested in federally insured or guaranteed loans… Usually those insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).

Also, Ginnie Mae is allowed to provide the same guarantee to guarantors or issuers of certain mortgage-type loans associated with the Department of Agriculture’s Rural Housing Service (RHS) and the Department of Housing and Urban Development’s Office of Public and Indian Housing (PIH).

Ginnie Mae securities are the only MBS-related guarantee which carries the full faith and credit guaranty of the United States government. Which means that an investment in Ginnie Mae MBS is one of the safest an investor can make.

Freddie Mac

Like Fannie Mae, Freddie Mac is was charted as a private company with statutory responsibilities in the housing market. They were created by an act of Congress in 1980 and are responsible for stabilizing the HOUSING market. They deal mostly in secondary markets.

They work not only in the mortgage arena but also in the rental area. They have 3 core business activities:

They provide services, securities and funding that helps make homeownership and rental housing more affordable.

They work to reduce the number of foreclosures.

They help families keep their homes, especially during hard times.

Although they are a separate legal entity, they work under the direction of the Federal Housing Finance Agency (FHFA).

They Make No Loans Directly To Consumers

Please be aware that none of Fannie Mae, Ginnie Mae nor Freddie Mac make loans directly to persons seeking to borrow money to buy their first home and will not be covered on this site.

Applying for an FHA loan is pretty much the same no matter which mortgage lenders you approach for the loan. It’s important to remembered that the FHA itself does not actually give the loan to you. Rather, what they do is to insure the loan.

But, because they are on the hook for the money that you borrow if you fail to pay back the loan, they are involved in the entire loan process; including an inspection of the property which you are buying to make sure that the property you are attempting to buy with an FHA loan meets their construction and repair standards.